A well-known passage in Edmund Burke’s Reflections on the Revolution on France cast aspersions on economists, and bracketed them with “sophisters” and “calculators”. To be precise, “The age of chivalry is gone; — That of sophisters, economists, and calculators, has succeeded, and the glory of Europe is extinguished forever.”
Burke in 1790 had an important insight which bears on a serious modern problem, namely how to organise national income accounting in the internet era. At the end of the 18th century the purpose of life was for many people rather more than “the maximisation of utility”, while the concept of gross domestic product had not been formalised. “Chivalry”, or more broadly the pursuit of a good moral life, was understood to have value even if that value could not be quantified in monetary terms. Indeed, many desiderata — such as the creation and enjoyment of beautiful things — were and remain difficult to fit into a GDP framework.
What about friendship? We all want to know what our friends are saying and thinking, and we all hope that our friends are interested in what we are saying and thinking. In the distant past the utterances of most people could be communicated only within a limited circle, usually indeed only to other people within earshot. Technology evolved, and the discovery of writing allowed us to communicate by letter, while the innovation of printing expanded the readership of the literate and eloquent who could write books and newspapers. But the literate and eloquent were few. Later, radio and television opened up vast audiences for broadcasters, but the numbers of these broadcasters were almost by definition very small relative to their audiences.
In other words, until very recently most contacts between friends were contacts that took place in small face-to-face meetings. Technology had made other kinds of contact possible, but these other kinds of contact were relatively infrequent.
Now, however, the world has been transformed by the internet and telecommunications. Google, Facebook, Twitter and LinkedIn have married the broadband revolution, and their union has enabled us to choose a virtually unlimited number of “friends”. (Unfortunately the word has to be in inverted commas.) We can communicate our statements to an enormous audience whenever we wish and, more or less, regardless of the audience’s distance from us.
The advance of technology has thus led to an enormous increase in the output of “friendship”. We are undoubtedly better-off because of that. Some people spend such a fantastically high proportion of their time on social media that they are virtual addicts. According to Wikipedia (quoting from the Nielsen consultancy), “Internet users continue to spend more time with social media sites than any other type of site.” More precisely, “The total time spent on social media in the United States across PC and mobile devices increased by 37 per cent to 121 billion minutes in July 2012 compared to 88 billion minutes in July 2011.”
So we have here a 37 per cent rise in one year in an activity that is plainly central to the lives of millions of people. Without question an annual increase of 37 per cent is a boom. But how is the 37 per cent jump in the output of “friendship” to be incorporated in GDP? This is Edmund Burke’s objection to crude utilitarianism. We value chivalry, morality, beauty and friendship. In some sense we value them more than the concepts of “aggregate consumption” and “gross domestic fixed capital formation” that are part of GDP. But the national income accountants do not know how to adjust the GDP data for the explosion in social media that has occurred over the last 20 years.
Plenty of information is available. The Office for National Statistics publishes much material on the consumer price index, with the latest monthly press release estimating that the price of “photographic, cinematographic and optical equipment” fell by 22.5 per cent in the year to February, with such equipment representing 0.3 per cent of consumer spending. That price fall meant that people were better off. On the other hand, the ONS believes that the price of telephone equipment rose by 2.9 per cent in the same period, despite the dramatic enhancements in capability of iPhones, iPads, Galaxies and so on.
There has to be a suspicion that the GDP growth has been understated in the last few years because sophisters, economists and calculators, despite their best efforts, cannot properly measure the increase in consumer satisfaction that has been made possible by the boom in social media. Can anyone doubt that the increased output of “friendship” is one of the glories of modern Europe?